Glencore May Be Headed for Another Record Trading Profit

(Bloomberg) -- Glencore Plc could be on course for another record year of trading profits as the commodities giant continues to benefit from soaring prices.

Core earnings from the trading unit are expected to exceed the top end of the company’s guidance range of $2.2 billion to $3.2 billion this year, Glencore said in a statement Friday. Last year’s $3.3 billion of trading profit was the highest ever.

Commodities across the board have surged on booming demand as the global economy works to rebound from the pandemic, sending the Bloomberg Commodity Spot Index to a record this month. Energy shortages in China and Europe have also helped drive up coal prices and constrained metal supply.

And while prices have swung lower at times -- coal and metals have tumbled this week as China moved to tackle its energy shortages -- market moves in either direction offer lucrative opportunities for the biggest commodity traders.

Oil majors like TotalEnergies SE have also reported strong trading performances from the volatile energy markets. While Glencore’s trading profit in the first half of $1.8 billion was driven by metal price gains, the volatile energy markets are likely to be a strong contributor in the second half.

The improved outlook for trading is positive if expected, given the strong first-half performance and tight commodity markets, analysts at RBC Capital Markets said in a note. 

“Considering that extreme commodity price volatility can cause hedges to disconnect, this positive affirmation should, however, reassure the market.”

Glencore is also a major miner, producing commodities such as copper, coal and zinc, and maintained its production targets for the year.

The company has also continued its efforts to get rid of smaller assets as it moves to simplify its business -- Glencore said Friday that it had agreed to sell its Chemoil Terminals LLC unit for $242 million. The unit owns oil products storage terminals in California. 

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